Release Date: August 20, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Record revenue and EBIT(A) of $2 billion and $140 million, respectively.
- Improved return on average capital employed (ROACE) to 17.2%, progressing towards a 20% target.
- Strong cash flow generation with operating cash flow steady at $301 million and free cash flow increased to $74.5 million.
- Significant reduction in net debt and gearing, enhancing financial stability.
- Successful acquisition of Decmil, expected to accelerate growth in the civil infrastructure business.
Negative Points
- Impact of Callidus receivership led to a full receivable impairment of $31.8 million.
- Statutory net profit after tax (NPAT) was lower at $53.2 million compared to underlying NPAT of $91.9 million.
- Skilled labor shortages and volatility in commodity prices continue to pose challenges.
- EBITDA cash conversion decreased to 85.9%, down from 99% in the prior year.
- Increased borrowing costs due to higher interest rates, with effective borrowing cost rates rising to 6.4%.
Q & A Highlights
Q: Can you provide more details on your FY25 guidance and expectations for the base business?
A: We expect to finish around two-thirds up the guidance range. The base business is projected to grow, with Decmil contributing $20 to $25 million. We aim to eventually achieve an 8% margin in the underlying business, with potential growth from converting opportunities in our pipeline.
Q: What is the outlook for CapEx, especially with Greenbushes coming online?
A: Sustaining CapEx is expected to be between $170 million and $190 million. The strategy is to maintain this level while turning additional earnings into free cash flow. Incremental CapEx for Greenbushes is planned for the next two to three years.
Q: Are there opportunities to renew contracts and improve margins, similar to Dawson South?
A: Yes, we are targeting similar opportunities to renew contracts and potentially improve margins. We are exploring scenarios to sensibly use our balance sheet to benefit shareholders.
Q: Can you elaborate on the potential recovery from the Callidus impairment?
A: We are hopeful for a pathway to recovery, given that Callidus was previously cash flow positive. If it continues operating, especially with exposure to current gold prices, we anticipate a potential recovery.
Q: What are your expectations for Decmil's profitability and margins?
A: We aim for a 6% EBIT(A) margin for Decmil, aligning with our strategy to scale all three business sectors. We have provided a bonding facility to maintain momentum and are hopeful for near-term contract awards.
Q: Can you provide more details on the $3.8 billion tender pipeline and its timing?
A: We expect several awards soon, especially with the Decmil transaction concluded and bonding facilities in place. The civil projects in the pipeline are expected to stay true to their timelines, with significant opportunities over the next 18 months.
Q: What are your plans for the non-core asset, Home Ground?
A: Home Ground is a non-core asset, but we aim for an orderly sell-down to get the best result for shareholders. We have seen increasing occupancy levels, which should optimize the sale price.
Q: How does the acquisition of Decmil fit into your long-term strategy?
A: The Decmil acquisition accelerates growth in our civil infrastructure business, improves free cash flow generation, and enhances our business model's resilience. We are well-positioned to tender for large-scale government infrastructure and renewable energy projects.
Q: What is your outlook for FY25 in terms of revenue and EBITDA?
A: We expect revenue to be in the range of $2.4 billion to $2.5 billion and underlying EBIT(A) to be between $160 million and $175 million. This positive outlook is supported by a strong $4.6 billion order book and a high level of secured work for FY25.
Q: How do you plan to balance dividend payments and financial flexibility?
A: We increased our payout ratio range for FY24, reflecting our focus on capital growth and improving business performance. We aim to sustainably increase dividend payments while maintaining a resilient balance sheet and flexibility to fund growth and acquisitions.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
